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Market Summary for 25/8/2015

Aug 26, 2015
Markets spent the most of Tuesday recovering from the sell-off on Monday, with a corresponding recovery in the US dollar against the Euro and Yen. The mood was lifted by a relief interest rate and reserve ratio cut by the PBOC later in the day, lifting stocks to their day highs. USD/JPY was capped by the 120 round figure level, while eur/usd briefly touched 1.14. However, it seems like the measures were not enough to support the market, with risky assets failing to rally much higher after the announcement, which then saw the S&P 500 index reversing over 4% down in a sell-off towards the close, losing all of its gains for the day. Aussie dollar remains under pressure, touching a fresh low of 0.71. 
 
Key risk events today: US Durable goods
 
It would be interesting to see how the PBOC sets its rate fix today following its interest rate cut yesterday. The market seems to be expecting a higher fix, but it would depend on the PBOC's willingness to keep defending its currency against further devaluations. Another thing to look out for would be how Asian markets handle the rate cut announcement by the PBOC, though things are looking decidedly poor right now. 

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